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The white knuckle ride that is the semiconductor industry

Global demand for semiconductors in 2017 appears to have boomed, with the market now seen by Gartner to be worth more than $421billion. As such, that represents a 22.2% increase over sales in 2016. But the figures appear to have been skewed by the memory market, where oversupply has inflated revenues significantly.

Gartner points out that, for the first year since the technology was launched, NAND flash revenues have increased on a year to year basis. DRAM prices, meanwhile, rose by 44%. That’s good news if you’re a memory maker.

And all the top memory companies saw improvements in their position in the industry league table. Samsung, in particular, saw its sales of semiconductors grow by more than 50%, pushing Intel from its traditional number one position in the process. Other beneficiaries included SK Hynix and Micron, with sales improvements of 79% and 78.1% respectively, and Western Digital, whose sales more than doubled.

We’ve seen ‘booms and busts’ over the years, so how solid is the semiconductor market? Gartner analyst Andrew Norwood put it succinctly. “Samsung’s lead is literally built on sand. Memory pricing will weaken in 2018 … and we expect Samsung to lose a lot of the revenue gains it has made.”

Where the market will go remains to be seen, but there is a belief that growth in 2018 will not be as high as in 2017.

Malcolm Penn, president of Future Horizons, said: “We correctly forecast the 2017 capacity shortages and start of the so-called industry super-cycle at a time when all other analysts were predicting low single-digit growth. We were also the first to predict the market would exceed $400bn and the first to predict 20% plus growth.

“Entering 2018, we find ourselves again out on a limb, with our belief that the current recovery has nowhere near run out of steam, whereas all others are predicting low 2018 growth. Barring a nuclear war or financial industry meltdown, continuing strong revenue growth is all but inevitable.”

Nuclear war notwithstanding, one thing remains all but certain; the white knuckle ride that is the semiconductor industry means there will be a ‘bust’ in the near future.

Graham Pitcher

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